From the December 1999 SURVEY OF CURRENT
BUSINESS

Improved Estimates of the National Income and Product Accounts for 195998 Results of the Comprehensive Revision

By Eugene P. Seskin

On October 28, 1999, the Bureau of Economic
Analysis (BEA) released national income and product accounts
(NIPA's) estimates beginning with 1959 that reflected
the 11th comprehensive revision of the accounts. These
estimates incorporate a number of major definitional and statistical improvements that are designed to
better measure the evolving U.S. economy.

The major improvements that were introduced in
this comprehensive revision were described in previous
articles in the SURVEY OF CURRENT BUSINESS. The
definitional and classificational changes, which were
described in an article in the August issue, included
the following: Recognition of business and government
expenditures for software, including own-account
production of software, as investment; reclassification
of government employee retirement plans; modified
treatment of private noninsured pension plans;
reclassification of certain transactions as capital
transfers; and redefinition of the value of imputed
services of regulated investment companies./1/

The statistical changes, which were described in
an article in the October issue, included the
following: Incorporation of the 1992 benchmark
input-output accounts and the preliminary results of
the 1996 annual update of those accounts; improved
estimates of the real value of unpriced banking services;
and incorporation of geometric-mean-type consumer price
indexes./2/

In addition, the presentational changes that were
made to the NIPA tables to reflect the definitional,
classificational, and statistical changes were
described in an article in the September issue./3/ The November
issue included a slightly expanded version of the
October 28, 1999, news release that presented the
revised estimates for the first time.

This article builds on the previous ones and presents a discussion of the major sources of the
revisionsthat is, the extent to which they are
attributable to the various definitional and statistical changesfor each of the major NIPA
aggregates and components beginning with 1959.

The most important differences between the revised and the previously published estimates for 195998 are
the following:

Current-dollar gross domestic product (GDP) was
revised up for all years; for 1998, GDP is revised up
$248.9 billion to $8,759.9 billion. The upward
revisions were primarily accounted for by the
definitional change that recognized software as
investment.

The revised estimates of real GDP show an
average annual growth rate of 3.4 percent, 0.2
percentage point higher than that shown in the
previously published estimates. The upward revision to
real GDP growth was primarily attributable to
statistical changes to prices and to the recognition of
software as investment.

The upward revisions to the growth of real GDP
were concentrated in the period since 1977. For
195977, the average annual growth rate was 3.7
percent, the same as in the previously published
estimates. For 197792, the growth rate of real GDP
was revised up 0.3 percentage point to 2.9 percent,
and for 199298, it was revised up 0.4 percentage point to
3.6 percent (table 1).

For business cycles as measured by turning
points in quarterly real GDP, there were no changes in
the timing of cyclical peaks and troughs, but there
were revisions to the pace of contractions and expansions. For contractions, the largest revision was
for the most recent one, which began in the second
quarter of 1990 and ended in the first quarter of 1991;
the average quarterly percent change (at annual rates)
is now -1.8 percent, compared with -2.7 percent in the
previously published estimates.

For the current expansion, which began in the
first quarter of 1991, the average quarterly percent
change through the second quarter of 1999 is now 3.5
percent, compared with 3.1 percent in the previously
published estimates.

For gross domestic purchases prices, the
revised estimates show an average annual growth rate of
4.1 percent, 0.1 percentage point lower than the
previously published estimates. The revisions to prices
primarily reflected statistical changes, including the
incorporation of newly available geometric-mean-type
consumer price indexes back to 1978, a new implicit
price for unpaid banking services, and the calculation
of prices for national defense consumption and investment
at a more detailed level than in the previously published estimates.

The revised estimates of real disposable personal income (DPI) show an average annual growth
rate of 3.5 percent, 0.2 percentage point higher than
in the previously published estimates. The upward
revision was largely accounted for by the definitional
changes to government employee retirement plans and to
capital transfers and by statistical changes to the
prices for personal consumption expenditures.

For the personal saving rate, the revised
estimates are substantially higher than the previously
published estimates; however, the rate continues to
show a two-decade downtrend. For 198298, the personal
saving rate now declines from 10.9 percent to 3.7
percent, compared with the previous decline from 9.0
percent to 0.5 percent (table 2). The higher
rate is primarily attributable to definitional changes,
particularly the reclassification of government employee
retirement plans.

For the national saving rate, the revised
estimates for 198898 are considerably higher than the
previously published estimates. During this period,
the upward revisions averaged 1.0 percentage point.
The higher rate is primarily attributable to
definitional changes, particularly the recognition of
software as investment.

Early next year, BEA will release revised NIPA
estimates for 192958 that reflect this comprehensive
revision. (For information on the availability of the
revised estimates, see the box below.)

The first section of this article discusses the
annual current-dollar estimates, and the second section
discusses the annual estimates of real GDP. The third
section discusses the annual price estimates, and the
fourth discusses the quarterly estimates of real GDP.
The fifth section discusses changes in methodology.

Annual Current-Dollar Estimates

For 195998, GDP was revised up for all years,
national income was revised down for most years, and
personal income was revised up for most years (table 3
and appendix A). Prior to 1995, the revisions to GDP
were largely accounted for by the definitional change
that recognized software as investment; excluding the
definitional and classificational changes, the
revisions to GDP were small. Beginning with 1995, the
revisions grew as a result of statistical changes that
affected personal consumption expenditures (PCE),
nonresidential structures, and State and local
government consumption expenditures and gross
investment.

For national income, the revisions largely
resulted from downward revisions to rental income of
persons that reflected an improved methodology for
estimating the income of persons from the rental of
nonfarm nonresidential properties. Downward revisions
to net interest were offset in most years by upward
revisions to corporate profits, reflecting the modified
treatment of noninsured pension plans. Other sizable revisions within national income included upward
revisions to nonfarm proprietors' income, beginning
with 1988, and downward revisions to wage and salary
accruals for 1996 and 1997 and a large upward revision
for 1998. (For further details on these revisions, see
the corresponding sections below.)

For personal income, the upward revisions
primarily reflected the reclassification of government
employee retirement plans (see the section "Personal
income and its disposition"). This reclassification
raised personal income, but it had no effect on
national income, because employer contributions were
added to other labor income (a component of both
national income and personal income) and were
subtracted from employer contributions for social
insurance (only a component of national income).

The remainder of this section provides additional
detail on GDP, national income, other NIPA aggregates, and their major components. Appendix B shows the
revisions to the components of the five summary
accounts of the NIPA's for 1959 and for 198798.

National income and product

GDP.GDP in current dollars was revised up for
all years; the average annual growth rate for 195998,
at 7.6 percent, was revised up 0.1 percentage point
from the previously published estimate. Expressed as a
percentage of the level of GDP, the revisions generally
increased over time: The revision was less than 0.1
percent of GDP for 1959, but it was 1.2 percent for
1992 and 2.9 percent for 1998. The revisions due to
the definitional changes ranged from zero for 1959 to
2.0 percent for 1998. The revisions due to the
statistical changes ranged from -0.1 percent for both
1982 and 1992 to 0.9 percent for 1998.

Gross domestic income (GDI) and the
statistical discrepancy.GDI was revised up for all
years beginning with 1976. The revisions as a
percentage of the level of GDI generally increased over
time, peaking at 2.6 percent for 1998. Prior to 1994,
the revisions to GDI for most years were similar to
those for GDP; the revisions to both mainly reflected
the definitional change that recognized software as
investment. Within GDI, these revisions primarily
affected the consumption of fixed capital. Beginning
with 1994, the upward revisions to both GDP and GDI continued
to be accounted for mainly by the definitional change
for software, but because of statistical changes, the
size of the revisions to GDP differed from that to
GDI.

The differences between the revisions to GDP and those to GDI are shown as revisions to the statistical
discrepancy./4/ These revisions result almost entirely from statistical
changes, because definitional and classificational
changes generally result in identical revisions to, or
offsetting revisions within, GDP and GDI.

For 195998, the revised estimates of the
statistical discrepancy averaged (without regard to
sign) 0.6 percent of GDP, 0.1 percentage point larger
than in the previously published estimates.

For 199298, in the revised estimates,
current-dollar GDP increases at an average annual rate
of 5.6 percent, 0.2 percentage point less than the
increase in GDI. In the previously published
estimates, this difference was 0.3 percentage point.

Product-side components

PCE for goods.PCE for goods was revised up for
197588, down for 198994, and up for 199598
(table 4). For 198892, the revisions
reflected the incorporation of the results of the 1992 input-output
(I-O) accounts./5/ Beginning with 1993, the
revisions reflected the extrapolation of the 1992 I-O
account estimates, using revised retail sales data
benchmarked to preliminary estimates from the 1997
Census of Retail Trade./6/ In addition, beginning with
1993, the commodity distribution for most goods was
affected by incorporating the results of the 1996
annual update of the I-O accounts./7/

PCE for durable goods was revised up for 197787 and down for 198898. For 197787, the revisions were
to furniture and household equipment and reflected the
addition of royalty payments to the estimates of
expenditures for records, tapes, and disks./8/ The downward revisions beginning with
1988 primarily reflected downward revisions to
expenditures for furniture and household equipment and for motor vehicles and parts. The revisions to
furniture and household equipment were mostly to video and audio equipment and to "other" durable house
furnishings. The revisions to motor vehicles and parts
were mostly to new autos and reflected an improved
methodology for estimating expenditures for new autos
that had been introduced in the 1992 I-O estimates.
Beginning with 1993, the revised estimates for motor
vehicles and parts also reflected a new method for
calculating net transactions of used vehicles that
incorporated modified retention periods and rates for
business-owned vehicles that depended on whether the
vehicles were owned, rented, or leased./9/

PCE for nondurable goods was revised up for all
years beginning with 1975. Prior to 1993, the
revisions were small, but there were sizable offsetting
revisions to some of the subcategories. Revisions
through 1987 reflected the reclassification of the
food-cost portion of the Special Supplemental Nutrition
Program for Women, Infants, and Children (see also the
section "Government consumption expenditures and gross
investment"); this reclassification also affected
subsequent years. For 198892, the revisions to PCE
for nondurable goods were small and primarily reflected
benchmarking to the 1992 I-O estimates; there were some
sizable offsetting revisions to subcategories. In
particular, food expenditures were revised up. Within
food, increasingly large upward revisions to "purchased
meals and beverages" reflected an improved allocation
of receipts for this category between purchases by
persons and purchases by business and by government
and also reflected improved estimates of the misreporting
adjustments for these receipts. Beginning with 1993,
nondurable goods was revised up by increasingly large
amounts that reached $46.5 billion for 1998. The
revisions were primarily accounted for by food;
increasingly large upward revisions to purchased meals
and beverages were partly offset by downward revisions
to food purchased for off-premise consumption.

Beginning with 1988, clothing and shoes
expenditures were revised down; the revisions were
primarily to women's and children's clothing and accessories. "Other" nondurable goods was revised down
for 198893 and up for 199498. This pattern reflected
the relative magnitudes of offsetting revisions to
subcategories: Downward revisions to expenditures for
tobacco products, for toilet articles and preparations, and for "cleaning and polishing preparations, and miscellaneous household supplies and paper products" and upward revisions to expenditures for drug
preparations and sundries.

PCE for services.Beginning with 1973, PCE
for services was revised up for all years except for
1986. For most years, the revisions largely reflected
definitional changes that affected personal business
services. In addition, there were a number of sizable offsetting revisions, reflecting benchmarking to the
1992 I-O estimates and the incorporation of newly
available and revised source data.

Beginning with 1992, there were sizable downward
revisions to housing services, particularly to the
imputed space rent for owner-occupied nonfarm dwellings and to rental payments for tenant-occupied dwellings.
For owner-occupied nonfarm dwellings, the revisions
reflected revised estimates of the effect on space rent
per unit of revised estimates of changes in the quality
of the owner-occupied housing stock./10/ For
tenant-occupied nonfarm, permanent-site housing, the
revisions reflected revised expenditures for household
utilities; this item is used to remove utility charges,
which are recorded separately in household operation
services, from estimates of mean gross rent based on
the Census Bureau's American Housing Survey (AHS). For
199698, revisions to both owner- and tenant-occupied
nonfarm space rent also reflected newly available 1997
AHS data on mean gross rent and the number of
tenant-occupied units.

For all years, especially for 199698, the upward
revisions to household operation services, particularly
to electricity services, reflected the addition of
commodity taxes to the reported source data./11/ For 1998, the revision to electricity services also
reflected the incorporation of data from the Energy
Information Administration on residential electricity
sales revenue.

Beginning with 1988, transportation
servicesparticularly motor vehicle "repair, greasing,
washing, parking, storage, rental, and leasing"
serviceswere revised down; these revisions reflected
the incorporation of the 1992 I-O accounts, of newly
available data on motor vehicle rental and leasing from
the Bureau of Labor Statistics (BLS) Consumer
Expenditure Surveys for 1996 and 1997, of revised
Census Bureau Service Annual Survey (SAS) data for
199397, and of preliminary SAS data for 1998. Airline
services were also revised down beginning with 1988,
reflecting the incorporation of the 1992 I-O estimates.

Beginning with 1989, there were sizable upward
revisions to medical care services, particularly to
other professional medical services, reflecting the
incorporation of the 1992 I-O accounts, revised SAS
data for 199397, and preliminary SAS data for
1998./12/ In addition, there were
sizable upward revisions to hospitals for 199698,
particularly to government hospitals; the revisions
were based on final fiscal year 1997 and preliminary
1998 Census Bureau data on State and local governments
receipts and expenditures. Beginning with 1993, these
upward revisions were partly offset by downward
revisions to nursing homes, reflecting the
incorporation of revised SAS data for 199397 and preliminary SAS data for 1998.

Beginning with 1991, there were upward revisions
to "other services"; prior to 1991, the revisions
tended to be smaller and occasionally downward. The
revisions primarily reflected revisions to personal
business servicesmainly to "services furnished
without payment by financial intermediaries except life
insurance carriers"as a result of the redefinition of
the value of imputed services of regulated investment
companies and revisions to "expense for handling life
insurance" as a result of the reclassification of
government employee retirement plans. In addition, for
most years, there were relatively small upward
revisions to education and research, reflecting the
incorporation of estimates of the expenses of private
elementary and secondary schools from the National
Center for Education Statistics. Beginning with 1978,
there were downward revisions to religious and welfare
activities that tended to become larger over time,
reflecting the removal of program service grants,
specific assistance to (or for) members, and benefits
paid to individuals from the operating expenses of
social welfare organizations and of museums and libraries in the 1982, 1987, and 1992 Censuses of
Services Industries./13/ Beginning with 1988, there were upward
revisions to net foreign travel that tended to become
larger over time, reflecting the incorporation of the
1992 I-O estimates of ocean passenger fares that were
based on data from the 1992 Census of Transportation,
Communications, and Utilities.

Nonresidential structures.In private fixed
investment, nonresidential structures was revised up
beginning with 1988 (table 5). The largest revisions
were to utilities, to mining exploration, shafts, and wells and for 1997 and 1998, to nonresidential
buildings. The revisions to utilities reflected the
incorporation of 1992 I-O estimates and revised Census
Bureau data on the value of construction put in place
for electric light and power and for gas structures.
The revisions to "mining" reflected the incorporation
of 1992 I-O estimates, data from the joint association
survey on drilling costs for 1997, and data from the
American Petroleum Institute on petroleum drilling
beginning with 1996. The revisions to nonresidential
buildings reflected the incorporation of revised Census
Bureau data on the value of construction put in place.

Equipment and software.In private fixed
investment, equipment and software (formerly producers'
durable equipment) was revised up for all years. The
revisions primarily reflected the recognition of
business expenditures for software as investment. In
addition, beginning with 1977, certain equipment was
reclassified from one product type to another in order
to reflect improvements made in classification during
the preparation of the 1992 I-O accounts. This
reclassification affected the following categories:
Instruments; photocopy and related equipment;
electrical equipment, not elsewhere classified
(n.e.c.); metalworking machinery; special industry
equipment, n.e.c.; and agricultural machinery, except
tractors. The incorporation of the results of the 1992
I-O accounts also contributed to small upward revisions
to equipment, beginning with 1988. Downward revisions
to computers and peripheral equipment for 199698
primarily reflected an improved allocation of detailed
imports and exports on the basis of data from the 1992
I-O accounts and revised estimates for shipments of
computers based on preliminary data from the 1997
Census of Manufactures.

Residential fixed investment.In private
fixed investment, revisions to residential structures,
beginning with 1988, were very small and mostly upward.
For 1998, a sizable downward revision to the
subcategory "residential improvements," which reflected the
incorporation of newly available Census Bureau data on
the value of construction put in place, was partly offset by upward
revisions to single-family structures and to brokers' commissions.

Change in private inventories.Change in
private inventories (formerly change in business
inventories) is calculated by adjusting inventories
reported by businesses on a book-value basis to a
current-period replacement-cost basis by removing
inventory profits and losses. The inventory valuation
adjustment (IVA), which is calculated as the change in
private inventories less the change in book values,
reflects inventory price changes for firms that value
inventory withdrawals at acquisition (historical) cost.
Except for 1997 and 1998, revisions to farm inventories
were negligible; the downward revisions for those years
largely reflected more complete U.S. Department of
Agriculture (USDA) data on crop harvests and crop
sales./14/

There were both upward and downward revisions to
private nonfarm inventories. Prior to 1984, the
revisions, which did not exceed $2.0 billion, primarily
reflected the use of economic census data on
inventories for construction industries (beginning with
1959) and for mineral industries (beginning with 1977)
in place of data on inventories from tabulations of tax
returns by the Internal Revenue Service (IRS)./15/ Beginning with
1984, the revisions were generally larger and also
reflected price revisions as a result of the
incorporation of BEA's semiconductor price index, an
improved price index for computer parts, and revised
commodity weights from the 1992 I-O accounts.
Beginning with 1993, preliminary information from the
1997 censuses of wholesale trade and retail trade also
contributed to the revisions. Finally, a large upward
revision for 1998 primarily reflected new source data
for the motor vehicle and the mineral industries.

Net exports of goods and services.Revisions to net exports of goods and services begin with 1986 and were relatively small
(table 6). The revisions were primarily to exports and imports of services and reflected revised estimates
from BEA's international transactions accounts (ITA's)
that were not previously incorporated into the
NIPA's./16/

Government consumption expenditures and gross
investment.Government consumption expenditures and gross investment (hereafter referred to as government
consumption and investment) was revised up for all
years except for 197482 (table 7). This pattern of
revisions generally follows that for Federal Government
consumption and investment, which was revised up for
all years except for 197383. The revisions to State and local government consumption and investment were
very small prior to 1991; thereafter, there were
several large upward revisions, most notably for 1998.

For Federal Government consumption and investment,
both national defense and nondefense were revised up;
the revisions primarily reflected the recognition of
software as investment, which added the general
government consumption of fixed capital (CFC) for
software to government consumption and added government
enterprise expenditures for software to
investment./17/ The downward revisions for 197383
primarily reflected revised BEA prices that were used
to calculate CFC for military aircraft.

For State and local government consumption and investment, upward revisions reflected the recognition
of software as investment, which added the CFC for
software to general government consumption and added
government enterprise expenditures for software to
investment./18/ These revisions
were mostly offset by downward revisions that reflected
the reclassification to PCE of the administrative
expenses of government employee retirement plans and of
the expenditures for certain other programs, such as
the Special Supplemental Nutrition Program for Women,
Infants, and Children and adoption assistance./19/ Beginning with 1991, the upward revisions
also reflected the incorporation of data from newly
available Census Bureau surveys of State and local
governments; a large revision for 1998 primarily
reflected the incorporation of preliminary data from
Census Bureau surveys of State governments for fiscal
year 1998.

Income-side components

Compensation of employees.Compensation
of employees was revised down for all years except for 1994 and 1998, reflecting
downward revisions to supplements to wages and salaries and to wage and salary
accruals (table 8).

For supplements, downward revisions to employer
contributions for social insurance generally more than
offset upward revisions to other labor income (OLI).
For both components, the revisions primarily reflected
the reclassification of government employee retirement
plans, which shifted the contributions made by the
governments to these plans from contributions for
social insurance to OLI. In addition, within OLI,
upward revisions to supplemental unemployment insurance
reflected the incorporation of more complete source
data and partly offsetting downward revisions reflected
the reclassification of directors' fees from OLI to
proprietors' income./20/

For wage and salary accruals, revisions were
relatively small and downward prior to 1996. Larger
downward revisions for 1996 and 1997 reflected downward
revisions to "wage accruals less disbursements"
(WALD) and to rest-of-the-world compensation./21/ The revisions to WALD resulted from the
incorporation of newly available BLS tabulations of
wage and salary data on private employees covered by
State unemployment insurance; the revisions to
rest-of-the-world compensation resulted from revised
ITA estimates. For 1998, newly available BLS data were
also the major source of a large upward revision to
wage and salary accruals.

Proprietors' income with inventory valuation
adjustment (IVA) and capital consumption adjustment
({CCAdj)}.Prior to 1988, proprietors' income with
IVA and {CCA}dj was revised by small amounts except for
1983, when there was a sizable upward revision (table 9).
Beginning with 1988, larger upward revisions reflected
upward revisions to nonfarm proprietors' income that more
than offset downward revisions to farm proprietors' income.

Prior to 1996, the upward revisions to nonfarm
proprietors' income primarily reflected an improved
adjustment that removes a double-counting of the income
of corporate partners./22/
Beginning with 1996, the revisions also reflected the
incorporation of corrected and newly available IRS
tabulations of tax returns for sole proprietorships
and partnerships for 1996 and 1997.

The downward revisions to farm proprietors' income
primarily reflected the use of a new methodology for
allocating farm income by legal formbetween
proprietors and corporationsthat is based on USDA
definitions rather than on a mixture of USDA and IRS
definitions./23/ The revisions also reflected newly
incorporated information on farm output, intermediate
purchases, subsidies, and factor incomes from USDA.

Rental income of persons with {CCAdj}.Rental
income of persons with {CCA}dj was revised down for all
years (table 10). The revisions primarily reflected
the use of an improved methodology for estimating the
income of persons from the rental of nonfarm
nonresidential properties./24/ Beginning with 1994, the downward
revisions also reflected the incorporation of revised and newly available source data from the Census
Bureau's American housing survey. The downward
revisions to rental income were partly offset by
downward revisions to mortgage interest paid (which is
deducted as a rental expense) that reflected revised
data from the Federal Reserve Board's flow-of-funds
accounts.

Corporate profits with IVA and {CCAdj}.Corporate profits with IVA and {CCA}dj was
revised up for all years except for 1995 (table 11).
Profits of domestic financial corporations were revised
up for all years; the revisions primarily reflected the
modified treatment of private noninsured pension
plans,/25/ the recognition of software
as investment, and beginning with 1991, the
incorporation of revised source data for interest paid
by regulated investment companies./26/ Profits of domestic nonfinancial corporations
were revised down for all years beginning with 1985,
primarily reflecting revised estimates of the {CCA}dj and an improved adjustment to remove foreign earnings of
U.S. corporations;/27/ these downward revisions
more than offset upward revisions that reflected the
recognition of software as investment. Profits from
the rest of the world were revised up beginning with
1982, reflecting revisions to the ITA's (see the
section "Foreign transactions").

The {CCA}djthe difference between depreciation
based on tax return data and consumption of fixed
capital (the NIPA estimate of depreciation)was
revised down beginning with 1972; these revisions
primarily reflected the addition of software as
investment, the adoption of a faster depreciation
schedule for personal computers, and beginning with
1986, revisions to the BEA adjustment that removes
amortization of intangibles from the tax-return-based
measure./28/ Beginning with 1973, the corporate IVA was
revised up for all years except for 1985 and 1986,
reflecting revised commodity weights from the 1992 I-O
accounts and revised price data (see the section
"Change in private inventories").

Net interest.Net interest was revised down
for all years (table 12). The downward revisions
primarily reflected the modified treatment of private
noninsured pension plans and the incorporation of
revised source data for interest paid by regulated
investment companies. Beginning with 1988, the
revisions were partly offset by a change in the
methodology for adjusting the interest receipts of
corporations with "captive" finance
subsidiaries./29/ The revisions also reflected the incorporation
of revised and newly available source data: Beginning
with 1982, from the Federal Reserve Board on mortgage
debt outstanding; beginning with 1985, from BEA's
ITA's; and, beginning with 1996, from IRS tabulations
of business tax returns.

Nonfactor incomes.Nonfactor incomeswhich
comprises indirect business tax and nontax liability,
business transfer payments, and "subsidies less current
surplus of government enterprises"was revised down
for most years prior to 1985; thereafter, except for no
revision for 1992, it was revised up (table 13).

Indirect business taxes was revised up beginning
with 1986, primarily reflecting the use of an improved
methodology that uses data from the Census Bureau's
Government Finances survey as the annual source
data for estimating most State and local government
taxes./30/
The revisions for 199698 also reflected the
incorporation of newly available data from the
Government Finances survey.

Business transfer payments showed very small
revisions beginning with 1985.

"Subsidies less current surplus of government
enterprises" was revised down for most years. These
revisions reflected upward revisions to the current
surplus that partly resulted from the recognition of
software as investment. Beginning with 1992, the
revisions primarily reflected revisions to the Federal
current surplus of enterprises, based on newly
incorporated source data from agency annual reports.

Consumption of fixed capital
(CFC).CFCthat is, the charge for the using up of
private and government fixed capitalwas revised up
for all years (table 14). The upward revisions, which
increased rapidly over time, primarily reflected the
recognition of software as investment; beginning with
1982, they also reflected the improved method for
depreciating personal computers. Capital consumption
allowances (CCA)that is, tax-return-based
depreciation for corporations and nonfarm
proprietorships and BEA estimates of historical-cost
depreciation (using consistent service lives) for farm
proprietorships, for rental income of persons, and for
nonprofit institutions serving individualswas revised
up for all years, primarily reflecting the addition of
deprecation for software that was not included in IRS
depreciation for corporations and for nonfarm sole
proprietors and partners. For 199698, the revisions
to CCA also reflected revised IRS tabulations of
corporate income tax return data for 1996 and newly
available tabulations for 1997.

Personal income was revised up for most years
(table 15). The revisions were small prior to 1970;
thereafter, they range from $4.0 billion for 1970 to $232.8
billion for 1998. The revisions reflected the
previously described revisions to the components of
national income that are included in personal
incomewage and salary disbursements, other labor
income, proprietors' income, and rental income of
personsand to the components of personal income that
are derived from related components of national
incomepersonal dividend income and personal interest
income. The revisions also resulted from revisions to
transfer payments to persons and to personal
contributions for social insurance.

The revisions to personal income mostly reflected
the reclassification of government employee retirement
plans, which raised personal income by (1) the amount
of employer contributions to these plans, which are
added to other labor income, (2) dividends and interest
received by these plans, which are added to personal
dividend income and to personal interest income, and
(3) personal contributions to these plans, which are no
longer included in personal contributions for social
insurancea component that is deducted in the
calculation of personal income. The reclassification
also reduced personal income by the amount of benefits
paid by these plans, which are no longer included in
government transfer payments to persons. The net
effect of the reclassification was to raise personal
income for all years.

Personal dividend income was revised up for most
years. The revisions largely reflected the modified
treatment of private noninsured pension plans and the
reclassification of government employee retirement
plans. Prior to 1982, the upward revisions were partly
offset by downward revisions that reflected the
exclusion of distributions of regulated investment
companies (mutual funds) that reflect capital gains
income. In the 1998 annual NIPA revision, the
exclusion had been carried back to 1982; for this
comprehensive revision, it will be carried back to
1946.

Personal interest income was revised up for most
years. Upward revisions that reflected the inclusion
of interest received by government employee retirement
plans more than offset downward revisions that
reflected the reclassification of dividend and rental
income received by private noninsured pension plans
from personal interest income to personal dividend
income and to rental income of persons, respectively.
Personal interest income was revised up while net
interest was revised down, because the interest
received by government employee retirement plans does not enter
into the calculation of net interest./31/ The revisions to personal interest income
also reflected the incorporation of revised and newly
available source data for estimating net interest (see
the section "Net interest"), net interest paid by
government (see the section "Government receipts and expenditures"),
and interest paid by persons (see the section "Personal outlays").

Transfer payments to persons was revised down for
all years, primarily because in the reclassification of
government employee retirement plans, the benefits from
these plans are no longer treated as government transfer
payments to persons (table 16).

Personal contributions for social insurancewhich
is subtracted in the calculation of personal
incomewas revised down for all years, because
personal contributions to government employee
retirement plans are no longer included.

Personal tax and nontax payments was revised down
for all years, primarily reflecting the
reclassification of estate and gift taxes as capital
transfers./32/

Disposable personal income (DPI)personal income
less personal tax and nontax paymentswas revised up
for all years, reflecting the upward revisions to
personal income and the downward revisions to personal
tax and nontax payments.

Personal outlaysPCE, interest paid by persons, and personal transfer payments to the rest of the world
(net)was revised up for most years, primarily
reflecting the revisions to PCE. Beginning with 1989,
the revisions to personal outlays also reflect upward
revisions to interest paid by personsprimarily
reflecting the incorporation of revised data on
consumer credit outstanding from the Federal Reserve
Boardand to personal transfer payments to the rest of
the world (net)reflecting the reclassification (from
the government sector to the personal sector) of
government employee retirement payments to nonresident
beneficiaries and the incorporation of revised ITA
estimates for unilateral current transfers.

Personal savingthe difference between DPI and personal outlayswas revised up for all years. The
upward revisions were primarily accounted for by the
reclassification of government employee retirement
plans, which shifts the savings associated with these
plans from the government sector to the personal
sector; the reclassification of estate and gift taxes
as capital transfers also raised personal saving and reduced government saving. The upward revisions to
personal saving resulted in corresponding upward
revisions to the personal saving ratepersonal saving
as a percentage of DPIthat ranged from 0.4 percentage
point for 1959 to 3.2 percentage points for 1998.
Nevertheless, the revised estimates retain the
long-term downtrend in the rate that was present in the
previously published estimates. For example,
previously, the rate fell from a peak of 9.0 percent in
1982 to 0.5 percent in 1998; now, the rate falls from
10.9 percent to 3.7 percent. The large upward revision
for 1998 also reflected the unusually large upward
revision to wages and salaries (see the section
"Compensation of employees").

Federal Government.Federal Government
current receipts was revised down for all years (table 17). The revisions reflected downward revisions to
contributions for social insurance that resulted from
the reclassification of contributions received by
Federal Government retirement plans and downward
revisions to personal tax and nontax receipts that
resulted from the reclassification of estate and gift
taxes as capital transfers. Statistical revisions to
current receipts, which began with 1982, were
relatively small and downward for most years.

Federal Government current expenditures was
revised down for all years. The revisions reflected
downward revisions to transfer payments that resulted
from the reclassification of benefits paid by Federal
employee retirement plans and downward revisions to
grants-in-aid to State and local governments that
resulted from the reclassification of investment grants
as capital transfers. Beginning with 1960, the
recognition of software as investment also contributed
to the downward revisions because the sum of the
amounts of purchased software and own-account
compensation and other production costs (reclassified
as investment) exceeded the amount of software
consumption of fixed capital that was added to
consumption expenditures. The downward revisions were
partly offset by upward revisions to net interest paid
that resulted from the reclassification of interest
received by Federal employee retirement plans to
personal interest income. Statistical revisions to
current receipts were generally small, with upward
revisions for 195971 and downward revisions for most
other years.

Prior to 1984, Federal Government net saving, as
measured by the current surplus or deficit on a NIPA
basis, was revised up for 14 years, revised down for 9
years, and unrevised for 2 years. Beginning with 1984,
Federal net saving was revised down for all years,
primarily reflecting the reclassification of government
employee retirement plans, which shifted the savings
associated with these plans from the government sector
to the personal sector.

State and local government.State and local
government current receipts was revised down for all
years, reflecting the downward revisions to
contributions for social insurance that resulted from
the reclassification of contributions received by State and local government retirement plans and the downward
revisions to Federal grants-in-aid and to personal tax and nontax receipts that resulted from the
reclassification of estate and gift taxes and of
investment grants as capital transfers. Beginning with
1985, these downward revisions were partly offset by
upward revisions to indirect business tax and nontax
accruals, reflecting an improved methodology for
estimating State and local government taxes./33/

State and local government current expenditures
was revised down for 195979 and revised up thereafter.
The pattern of revisions reflected the relative
magnitude of offsetting revisions over the period:
Transfer payments was revised down, reflecting the
reclassification of benefits paid by State and local
government employee retirement plans; net interest paid
was revised up, reflecting the reclassification of
interest received by the retirement plans to personal
interest income; and dividends receivedwhich is
subtracted in the calculation of current
expenditureswas revised down, reflecting the
reclassification of dividends received by the
retirement plans to personal dividend income.
Consumption expenditures, the largest component of
current expenditures, was revised up for 195977, down
for 197895, and up for 199698; large upward revisions
for 1997 and 1998 were more than accounted for by the
incorporation of newly available source data from the
Census Bureau surveys of State and local governments.

State and local government net saving, as measured
by the current surplus or deficit on a NIPA basis, was
revised down for all years. The revisions primarily
reflected the reclassification of government employee
retirement plans, which shifted the savings associated
with these plans from the government sector to the
personal sector, and the reclassification of estate and gift taxes.

Receipts from the rest of the world was unrevised
prior to 1970, had small or no revisions for 197081,
and had sizable upward revisions thereafter (table 18).
The revisions to exports of goods and services, which
begin with 1986, were relatively small except for 1998;
an upward revision of $7.3 billion for 1998 primarily
reflected the incorporation of revised ITA estimates
for exports of services. Upward revisions to income
receipts, beginning with 1982, were primarily
accounted for by corporate profits, reflecting the
incorporation of improved ITA estimates of the
current-cost adjustment and of other ITA estimates that
were not previously incorporated into the
NIPA's./34/
In addition, for 198698, the revisions to receipts
reflected revisions to interest that also reflected the
incorporation of revised ITA estimates.

Within payments to the rest of the world, the
revisions to imports of goods and services began with
1992 and tended to be small except for a downward
revision for 1992 and an upward revision for 1998. The
revisions primarily reflected the incorporation of
revised ITA estimates for imports of services.
Beginning with 1982, income payments was revised
mostly upward by relatively small amounts
except for larger upward revisions for 199598. For
most years prior to 1995, upward revisions to profits
and to compensation more than offset downward revisions
to interest. Beginning with 1995, all three of these
subcomponents either were revised up or were unrevised;
the revisions reflected the incorporation of revised
ITA estimates. Prior to 1982, net foreign investment
showed small or no revisions; thereafter, there were
larger upward revisions, primarily reflecting the
upward revisions to net receipts of income.

Gross saving and investment

Gross saving, or national savingwhich consists
of gross private saving and gross government
savingwas revised down by small amounts for 195973
and up by larger amounts for 197498 (table 19).
Upward revisions to gross private saving more than offset
downward revisions to gross government saving. The upward
revisions were primarily accounted for by the recognition
of software as investment, which added the consumption of
fixed capital (CFC) for software to CFC for both the
business and government sectors and increased both
undistributed corporate profits and the government
current surplus or deficit by small amounts./35/
(The downward revisions to undistributed corporate profits with
IVA and {CCA}dj primarily reflected the revisions to the {CCA}dj.)
As noted earlier, the revised treatment of
government employee retirement plans did not affect
national saving, but it raised personal saving (a
component of gross private saving) and reduced the
government current surplus or deficit (a component of
gross government saving) by offsetting amounts. The
reclassification of certain transactions as capital
transfers reduced gross saving by small amounts.
Finally, the large upward revision to wage and salary
accruals for 1998 contributed to the upward revisions
to personal saving and national saving for that year.

Gross investmentwhich consists of gross private
domestic investment, gross government investment, and net
foreign investmentwas revised up for all years
except 1959. The revisions were primarily
to gross private domestic investment and to gross
government investment and reflected the recognition of
software as investment. In addition, beginning with
1982, net foreign investment was revised up by sizable
amounts, reflecting the incorporation of improvements
to the ITA's that were not previously incorporated into
the NIPA's.

Annual Estimates of Real GDP and Real DPI

In general, revisions to real GDP reflect three
factors: (1) Revisions to the current-dollar components
of GDP for which chained-dollar estimates are prepared
by deflation, (2) revisions to the prices used to
estimate components of real GDP by deflation, and (3)
revisions to the quantities used to estimate components
of real GDP by extrapolation or direct valuation. The
reference year was shifted to a more recent year, 1996,
but because the price and quantity indexes and chained-dollar estimates are measured with chain-type
indexes, the change of the reference year does not, by
itself, affect the percent changes of these series.

For 195998, the revised chained-dollar estimates
of real GDP showed an average annual growth rate of 3.4
percent, 0.2 percentage point higher than was shown in
the previously published estimates (table 20). The
growth rates were revised up for most major components
of GDP. The growth rate of equipment and software was
revised up the most. The growth rates of PCE for
nondurable goods, nonresidential structures, and
national defense consumption expenditures and gross
investment were also revised up substantially. The
growth rates of PCE for durable goods, residential fixed investment,
and imports of goods and services were unrevised.

The revisions to the growth rate of real GDP for
the entire 195998 period can be divided into three
subperiods: 195977, 197792, and 199298. For
195977, the growth rate was unrevised at 3.7 percent.
For 197792, it was revised up 0.3 percentage point to
2.9 percent, reflecting the incorporation of
geometric-mean-type CPI's back to 1978 (see the section
"Annual Prices"), the recognition of software as
investment, and the improved estimates of unpriced
banking services./36/ For 199298, the growth rate was
revised up 0.4 percentage point to 3.6 percent,
reflecting the increasing importance of software over
this period, the improved estimates of unpriced banking
services, and the incorporation of newly available source dataincluding the geometric-mean-type CPI's
for 199294that affected the estimates for that
period.

Annual changes.For 195991, the annual, or
year-to-year, percent changes in real GDP were revised
up for 21 of the 33 years; the changes for 1961,
196365, and 1967 were unrevised; and the changes for
1962, 197173, 1976, and 1977 were revised down (chart 1).
Upward revisions of 0.5 percentage point or more were
recorded in 4 years (1979, 1987, 1990, and 1991); the
largest revision was for 1991, when the change in real
GDP was revised from -0.9 percent to -0.2 percent.

For 199298, the percent changes in real GDP were
revised up for all years. The largest revisions were
for 1992 (up 0.6 percentage point to 3.3 percent) and
for 1997 (up 0.6 percentage point to 4.5 percent).

Real disposable personal income (DPI).For
195998, the revised estimates of real DPI showed an
average annual growth rate of 3.5 percent, 0.2
percentage point higher than was shown in the
previously published estimates (table 20). For
195992, the average annual growth rate was 3.6
percent, also 0.2 percentage point higher; for 199298,
the growth rate was 2.8 percent, 0.3 percentage point
higher.

Revisions to the chain-type price indexes result
from the incorporation of revised and newly available source
data and of revised weights into the chain formula./37/

For 195998, the revised chain-type estimates for
gross domestic purchases prices showed an average
annual growth rate of 4.1 percent, 0.1 percentage point
lower than the previously published estimate (table 21). For GDP prices, the revised growth rate was 4.0
percent, 0.2 percentage point lower than the previously
published estimate.

For 195992, the revised chain-type estimates for
gross domestic purchases prices showed an average
annual growth rate of 4.5 percent, 0.1 percentage point
lower than the previously published estimate. For GDP
prices, the average annual growth rate was 4.4 percent
0.2 percentage point lower than the previously
published estimate.

For 199298, the revised chain-type estimates for
gross domestic purchases prices showed an average
annual growth rate of 1.8 percent, the same as the
previously published estimate. For GDP prices, the
average annual growth rate was 1.9 percent, 0.1
percentage point lower than the previously published
estimate.

For 195992, the largest revisions were to the
prices of PCE for nondurable goods and to the prices of
national defense. The revisions to the prices of PCE
for nondurable goods reflected the incorporation of
geometric-mean-type CPI's back to 1978./38/ The revisions to
the prices of national defense reflected both the
incorporation of revised prices that were used to
calculate CFC for military aircraft and the calculation
of chain-type price indexes at a more detailed level
than in the previously published estimates.

For 199298, the largest revisions were upward to prices
of nonresidential structures, of nonresidential equipment
and software, of residential structures, and of imports and
downward to prices of PCE for durable goods and of Federal nondefense.

Quarterly Real GDP

Revisions to quarterly (and monthly) NIPA
estimates reflect the revisions to the annual
estimates, the incorporation of new and revised
monthly and quarterly source data (including the updating of
seasonal factors), and the introduction of changes in
methodology.

This section focuses on the impact of revisions on
business cycles, as measured by turning points in
quarterly real GDP, particularly on the most recent
cycles (table 22) and on the most recent quarters
(table 23).

For the period beginning with 1959, there are no
changes in the timing of business cycle peaks and troughs. Of the six contractions since 1959, all have
less steep declines except the contraction that began
in the third quarter of 1969; for that contraction, the
decline was unrevised. The largest revision was for
the contraction that began in the second quarter of
1990; the average quarterly percent change in real GDP
(at annual rates) is now -1.8 percent, compared with
-2.7 percent in the previously published estimates.

Of the five complete expansions since 1959, two
now have stronger increases, two have weaker increases,
and one was unrevised. The largest upward revision was
for the expansion that began in the third quarter of
1982; the average quarterly percent change is 4.1
percent, compared with 3.8 percent in the previously
published estimates.

For the current expansion, which began in the
first quarter of 1991, the average quarterly percent
change through the second quarter of 1999 is now 3.5
percent, compared with 3.1 percent in the previously
published estimates.

Of the 34 quarters of the current expansion, the
quarter-to-quarter percent change in real GDP was
revised up for 25 quarters and revised down for 9
quarters (chart 2). The revisions averaged
0.5 percentage point (at annual rates, without regard
to sign).

In the current expansion, the two largest
quarterly revisions were 1.5 percentage points: For
the fourth quarter of 1991, the increase was revised up
to 2.5 percent, primarily reflecting the upward
revision to the current-dollar estimate for the change
in private nonfarm inventories; for the fourth quarter
of 1994, the increase was revised up to 5.1 percent,
primarily reflecting upward revisions to the
current-dollar estimates for equipment and software and for the change in private nonfarm inventories.

Changes in Methodology

Comprehensive revisions provide the opportunity to
introduce new and improved methodologies. Most of the
methodological changes that were introduced in this
comprehensive revision were described in the October
SURVEY article on statistical changes; an
additional change is described in this section. In
addition, the definitional change that recognized
software as investment required the development of
methodologies to prepare these estimates. The
methodology for the annual estimates was described in a
"Technical Note" in the August SURVEY article on
definitional and classificational changes;/39/ the methodology
for the quarterly estimates is described in this section.

New deflator for imputed unpriced services of regulated investment companies

Beginning with 1959, the imputed value of unpriced
services of regulated investment companiesthat is,
mutual fundshas been redefined to equal operating
expenses./40/ Under the new definition,
operating expenses of regulated investment companies
are measured as the amount reported on their Federal
income tax return as "total deductions" plus BEA
estimates of implicit charges by security dealers and of the imputed value of unpriced services charged by
other financial intermediaries.

Accordingly, the methodology for estimating the
real value of unpriced services has been changed.
"Total deductions" and unpriced services charged by
other financial intermediaries are now deflated with a
composite index prepared from the producer price index and the employment cost index; the reference-year value
of the implicit charges by security dealers is
extrapolated by the number of orders placed by
regulated investment companies. Previously, the real
value of the unpriced services was estimated by
extrapolating the reference-year value by the hours
worked by employees of regulated investment companies
with no adjustment for changes in the productivity of
these employees.

The change in methodology mostly affects PCE
because these services are predominantly furnished to
persons, but it also has a small effect on State and local government consumption expenditures.

Methodology for quarterly software estimates

Like most of the components of GDP, the annual
estimates of software are based on source data that are
more comprehensive and reliable than those available
for the quarterly estimates./41/ The quarterly estimates are prepared by interpolating
and extrapolating the annual levels, using as
indicators source data whose changes are similar to the
changes in the annual estimates andwhen such
indicator series are not availableusing mathematical
techniques that generate smooth quarterly changes or
using judgmental trends. More detailed information
about the annual and quarterly estimates of software
will be posted early next year on BEA's Web site at
<www.bea.doc.gov>.

Current-dollar investment estimates.Table 24
summarizes the source data used
as indicators for calculating the quarterly estimates
of current-dollar software investment.

Purchased software.The source data used for
prepackaged and custom software are essentially
identical. For 195975, quarterly estimates for both
types of software were prepared using interpolation
without an indicator series. For 197687, the
indicator series for both types of software was
unemployment insurance (UI) wage and salary data for
SIC 7372 (computer programming services and prepackaged
software). For 198898, the indicator series for
custom and for prepackaged software were UI data for
SIC 7371 (computer programming services) and SIC 7372
(prepackaged software), respectively./42/
For 1999, these UI series were used to extrapolate the
quarterly estimates; until the UI series become
available, a judgmental trend is used. (UI wage and salary data are available with a two-quarter lag for
the advance and the preliminary current-quarterly
estimates and with a one-quarter lag for the final
current-quarterly estimates.)

Own-account software.Beginning with 1959, a
lagged three-quarter moving average of private fixed
investment in computers and peripheral equipment was
used as the indicator series for business software and
for State and local government software. A lagged
three-quarter moving average of Federal Government investment
in computers and peripheral equipment was used as the
indicator series for Federal Government software.

Price estimates.Table 25 summarizes
the source data used as indicators for calculating the
quarterly estimates of software prices. Real quarterly
software investment at the most detailed level was
derived by deflationthat is, by dividing the current-dollar
quarterly investment flows by price indexes./43/

Prepackaged software.For 195996, this price
index was prepared by interpolation without an
indicator series. For 1997, the indicator series was a
quarterly version of BEA's matched-model price index
for prepackaged software, which was linked to the
producer price index (PPI) for "prepackaged
softwareapplications software" (PPI 73722) that BLS
began publishing in December 1997; this PPI was used as
the indicator series thereafter.

Custom software.Beginning with 1959, this price
index was prepared using as the indicator series a
weighted average (25 percent prepackaged software and 75 percent business own-account software) of the
percent changes in the price indexes for prepackaged
software and for business own-account software
(described next).

Business own-account software.This price
index was prepared using as the indicator series a
weighted average of price indexes for intermediate
inputs, for compensation of computer programmers, and for compensation of computer systems analysts. For all
quarters, the intermediate inputs price index was based
primarily on detailed PPI estimates. For 195979, the
price indexes for compensation of computer programmers and of systems analysts were estimated without an
indicator series. Beginning with 1980, the employment
cost index for "total compensation, all workers,
private industry" was used as the indicator series.
The compensation price indexes and the intermediate
inputs price index were combined using a Fisher
chain-type formula to calculate the indicator series
for the business own-account software price index.

Government own-account software.Separate price
indexes for Federal Government and for State and local
government own-account software were calculated using
the same methodology as that used for business, but
using different compensation price indexes. For
Federal Government own-account software, an adjusted
NIPA price index for Federal nondefense compensation
was used to estimate the programmer and systems analyst
price indexes./44/ For
State and local government own-account software,
the NIPA price index for compensation of State and
local government noneducation employees was used.

Consumption of fixed capital (CFC) and business incomes.Quarterly estimates of CFC for
each software category were calculated as the product
of quarterly estimates of real CFCderived by
interpolating annual estimates without an indicator
seriesand quarterly software price indexes.
Estimates for the current quarters were prepared as the
product of judgmental projections of real CFC and the
current-quarterly software prices described earlier.
Real CFC was calculated separately for total
investment, for business and government investment, and within government, for Federal Government defense and nondefense and for State and local government. In
addition, separate estimates were prepared for Federal
Government enterprises, for State and local government
enterprises, and for nonprofit institutions serving
individuals. For capital consumption allowances and the other adjustments to business incomes, separate
estimates were not prepared; the CFC's for these
components were assumed to change quarterly in a manner
similar to the components of which they are a part.

4. The statistical discrepancy, which measures the
difference between GDP and GDI, arises because GDP and GDI are estimated
using largely independent source data. See the box "The Statistical
Discrepancy" in Robert P. Parker and Eugene P. Seskin, "Annual Revision of the National Income
and Product Accounts," SURVEY
77 (August 1997): 19.

8. PCE
estimates for this category are benchmarked to I-O values, which are prepared
using the commodity-flow method in which these estimates are calculated by
adjusting the value of manufacturers' shipments of records, tapes, and disks for
exports and imports, trade and transportation margins, and taxes. Because royalty
payments are not directly reported in the source data used for these series,
previous I-O estimates did not reflect the full market value of these
expenditures.

10. Imputed space
rent for owner-occupied nonfarm dwellings is space rent per unit times the number
of units. Space rent per unit equals net contract rent less consumption of fixed
capital on major appliances and furnishings. Net contract rent per unit is
interpolated between, and extrapolated from, benchmark values, using the change
in the consumer price index for owners' equivalent rent of primary residence with a
judgmental adjustment for changes in the quality of housing.

13. An analysis of reporting instructions for
tax-exempt organizations revealed that amounts of gifts and grants were reported
as expenses; subsequently, these amounts were removed in the 1992 I-O estimates
because these payments are not classified as expenses of nonprofit organizations in
the NIPA's.

14. The IVA is not needed for farm inventories, because they are
measured on a current-market-price basis.

17. In addition, general government expenditures for
software (both purchased software and own-account production of software) were
reclassified from government consumption expenditures to gross government
investment.

21. WALD is
the difference between wages earned, or accrued, and wages paid, or disbursed. In
the NIPA's, wages accrued is the appropriate measure for national income, and wages disbursed is the appropriate measure for personal income. To estimate
WALD, BEA converts annual disbursements data based on BLS tabulations of
wages and salaries to an accrual basis. WALD consists of BEA estimates of bonus
payments that are declared at the end of a year but that are actually paid the next
year.

42. Beginning
with 1988, the UI wage and salary data reflected a change introduced in the 1987
SIC that created separate industries for custom and prepackaged software.

43. Aggregate
measures of software, such as "all business" or "all government" were
calculated using the Fisher index-number formula.

44. The adjustment changes the NIPA treatment of
pay raises by distributing the amount throughout the entire year;
in the published compensation series, pay raises are usually allocated
to the first quarter. This adjustment eliminates the volatility in
the own-account investment series that would have appeared in the
real own-account software investment series.